Brendan Crawford, Inspector of Taxes v Centime Ltd

• Jurisdiction: Ireland
• Judge: Clarke J.
• Judgment Date: 21 October 2005
• Neutral Citation: [2005] IEHC 328
• Court: High Court
• Docket Number: [2005 No. 62R]
• Date: 21 October 2005

[2005] IEHC 328

THE HIGH COURT

No. 62 R/2005

CRAWFORD (INSPECTOR OF TAXES) v CENTIME LTD

BETWEEN

BRENDAN CRAWFORD, INSPECTOR OF TAXES

APPELLANT

AND

CENTIME LIMITED

RESPONDENT

VALUE ADDED TAX ACT 1972 S8

GIRLOY v FLYNN UNREP SUPREME 3.12.2004

VALUE ADDED TAX ACT 1972 S9

VALUE ADDED TAX ACT 1972 S20

ROMPELMAN v MIN VAN FINANCIEN 1985 3 CMLR 202

EEC DIR 77/388 ART 4

EEC DIR 77/388 ART 17(1)

VALUE ADDED TAX ACT 1972 S12(1)(a)

VALUE ADDED TAX ACT 1972 S4(2)

VALUE ADDED TAX ACT 1972 S1

VALUE ADDED TAX ACT 1972 S4(1)(a)

INTERCOMMUNALE VOOR ZEEWATERCONTZILTUNG (INZO) IN LIQUIDATION v BELGIAN STATE 1996 ECR 1-857GRUNDSTUCKGEMEINSHAFT SCHLOSSTRASSE v FINANZAMT PADERBORN 2000 ECR I 04279

TAXES CONSOLIDATION ACT 1997 S849

TAXATION

Valued added tax

Development land - Land purchased subject to planning permission - Abandonment of development - Repayment of VAT sought on amounts expended on development - Whether respondent taxable person - Whether respondent could have refunds made to it - Whether respondent complied with conditions required by authorities in order for it to be considered taxable person - Whether criteria imposed-by authorities consistent with jurisprudence of European Court of Justice - Rompelman v Minister van Financien (Case 286/83) [1985] ECR 655 applied - Value Added Tax Act 1972 (No 22), s 8(2) - Respondent entitled to refunds

Facts: The appellant appealed by way of case stated on a point of law from a determination of the Appeals Commissioner (A.C.) to the effect that the respondent was a taxable person for the purposes of section 8 of the Act of 1972. The respondent was a property developer who agreed to purchase lands conditional on planning permission. Despite incurring substantial expenditure in relation to the project the respondent decided on commercial grounds to abandon the project. However, the respondent sought repayment of Value Added Tax charged by suppliers.

Held by Clarke J. in determining that the decision of the A.C. was correct in law: That there was more than ample objective evidence which would have allowed the A.C. to come to the conclusion he did, namely that there was a bona fide intention to develop and to exploit the land in a manner which would confer taxable status on the respondent.

Reporter: L.O'S.

1 JUDGMENT of Clarke J. delivered on the 21st October, 2005.

1. Introduction

2 2 1.1 In this case the appellant Inspector of Taxes ("the Revenue") appeals by way of case stated on a point of law from the determination of the Appeals Commissioner to the effect that the respondent ("Centime") is a taxable person for the purposes of s. 8 of the Value Added Tax Act 1972. In general terms a person who is a "taxable person" for those purposes is entitled to reclaim VAT paid out by them on inputs into their economic activity. A person who is not a taxable person is not so entitled. The reason why, therefore, the question as to whether Centime is or is not a taxable person is of importance to the parties is that if Centime is a taxable person it is entitled to reclaim VAT on inputs into its economic activity whereas if it is not, properly speaking, a taxable person it is not entitled to make such a reclaim. On foot of the view taken by the Appeal Commissioner (to the effect that Centime was a taxable person) the Appeal Commissioner confirmed VAT repayments in the amount of €667,165.26 which when allowance was made for VAT properly due in the amount of €7,528.82 left a net repayable amount of VAT in the sum of €659,636.44.

3 3 1.2 Having, in accordance with the Taxes Acts, expressed dissatisfaction with the decision of the Appeal Commissioner the Revenue bring the matter before this court on appeal by way of case stated.

4 4 1.3 Before passing on to the issues which arise in the case stated I might note that the decision of the Appeal Commissioner was given at a hearing on 14th June, 2002. The case stated is dated 28th January, 2005 which is in excess of 30 months later. I am aware that it is, in most cases, left to the parties to attempt to agree a case stated and that that process frequently leads to significant delay in the presentation of an agreed text for approval to the Appeal Commissioner concerned. I should also add that the delay in this case is by no means unusual in the context of attempts to agree the text of a case stated in Revenue matters. However it is important to note that the jurisprudence of the courts in this jurisdiction, relying at least in part on the jurisprudence of the European Court of Human Rights, has come, in recent times, to recognise the necessity for the supervision of matters before the courts in a manner designed to ensure the timely disposal of all litigation (see for example Gilroy v Flynn, Unreported, Supreme Court, Hardiman J. 3rd December, 2004). Similar principles apply to quasi judicial tribunals such as the Appeal Commissioner which can have serious consequences for the rights of parties particularly where such tribunals are, in a sense, preliminary to the courts system. It seems to me that that it may well be necessary to give active consideration to the possibility of introducing improved methods for arriving at the text of a case stated so as to avoid the sort of delays which occurred in this case and occur in many other cases. In making this point I would wish to emphasise that no specific blame can be attached to any of the parties involved in the current case. The above comments should be taken as referring to the general issue of the need to introduce a more efficient system for ensuring the timely forwarding of a case stated to this court rather than being seen as a comment on anything specific that arises on the facts of this case.

2. The Facts

5 2 2.1 It is settled law that this court is bound by the findings of fact of the Appeal Commissioners save to the extent that it may be possible, in certain limited cases, for a party to persuade this court that the findings of fact made in a particular case are not properly supported by the evidence. No such challenge is made in this case and I must, therefore, consider the legal issues which arise on the basis of the facts as determined by the Appeal Commissioner. As set out at paragraph 5 of the case stated the facts found were as follows:-

6 (a) The Respondent is a wholly owned subsidiary of the Football Association of Ireland, incorporated for the purpose of developing what is now known as Eircom Park, for use as a football stadium and as a venue for other events

7 (b) By contract dated 19th January, 1999, the Respondent agreed to purchase lands from Place Properties Ltd. at Fortunestown, Tallaght, Dublin 24, comprising 50 acres for £13.5 m. The agreement was conditional on planning permission and provided for a deposit of £675,000. The deposit was paid to Arthur Cox & Co., solicitors as stakeholders. The deposit had been repaid to the Respondent at the date of the second hearing before me.

8 (c) The Respondent incurred expenditure in excess of €4m, including VAT, in relation to the project.

9 (d) On 1st June, 1999, the Respondent was registered for VAT pursuant to Section 9 of the VATA, 1972, as and from 30th October, 1998.

10 (e) Application for planning permission was lodged with South Dublin County Council on 8th October, 1999 for the development of a 45,000 all seater recreational and performance area.

11 (f) Evidence was given at the appeal hearing, which was not disputed, that planning permission issued in September 2000 and was appealed by the Respondent to An Bord Pleanála in October/November 2000. The Appeal hearing before An Bord Pleanála was listed for April 2001. An Bord Pleanála did not rule on the Appeal because the Respondent had decided on commercial grounds to abandon the project in March 2001. A lease between Centime Ltd and its subsidiary Landau Limited, the nominated operator of the project, was never executed. By notice dated 14th October, 1999, pursuant to Section 20 of the VATA, 1972, the Respondent sought repayment of Value Added Tax charged by suppliers for the period November 1998 to October 1999.

12 (g) The Appellant repaid claims for the periods November/December 1998 €5,026.89, March/April 1999 €799.93 and January/February 2001 €1,065.31 and withheld the remaining claims on the basis that the Respondent had not yet complied with the three conditions required by the Appellant for the treatment of a property developer as a taxable person (the conditions were, in the opinion of the Appellant, derived from the ECJ case of Rompelman ûv- Minister Van Financien, 1084, 3 CMLR 202) namely:

13 (1) The person must have an interest in the property

14 (2) Planning permission to develop the property must have been granted; and

15 (3) The person must declare his intention to make a taxable disposal of an interest in the property.

16 The Appellant accepted that the Respondent complied with the third condition.

3. The Conclusions

17 2 3.1 Having reviewed the arguments of both sides the Appeal Commissioner came to the following conclusions:-

18 (a) The appropriate test for establishing whether a person is a taxable person is whether that person has established a genuine declared intention to make a taxable supply and whether that intention can be properly supported by objective evidence. (Rompelman Paragraph 24).

19 (b) It is established "... that a person who has the intention, confirmed by objective evidence, to commence independently an economic activity ... and who incurs the fist investment expenditure for those purposes must be regarded as a taxable person. Acting in that capacity, he has therefore ... the right immediately to deduct the VAT payable or paid on the investment expenditure incurred for the purposes of the transactions which he...